What Cities Need to Know About Coronavirus State and Local Fiscal Recovery Fund Guidance

May 18, 2021

Federal guidance released last week provides initial direction for how cities can receive and use Coronavirus State and Local Fiscal Recovery Funds.

The U.S. Department of Treasury released the Interim Final Rule on May 10 for the Coronavirus State and Local Fiscal Recovery Funds authorized by the American Rescue Plan Act (ARPA). The Interim Final Rule will serve as the guidance for states and local governments on eligible expenditures and reporting requirements for the funds.

The 151-page document provides a non-exclusive list of allowable expenditures, encouraged expenditures, and prohibited expenditures, as well as a framework for states and local government to assess eligibility for using the funds for specific projects and services.

Cities are also encouraged to review the Treasury’s Frequently Asked Questions document, which provides highlights from the Interim Final Rule. This will be helpful as your city determines how best to address local needs with the allocated funds.

Guidance highlights

The Interim Final Rule provides a framework for a broad array of eligible uses of the funds. Categories of eligible uses include:

  • Responding to the public health emergency.
  • Responding to the negative economic impacts of the pandemic.
  • Premium pay for essential workers.
  • Replacement of revenue lost due to the pandemic that would be used to provide government services.
  • Necessary investments in water, sewer, and broadband infrastructure.

The guidance also provides a framework to assess eligibility for projects and services not explicitly listed in the non-exclusive list of eligible expenditures. This framework includes the following points:

  1. Identify the harmful effect of COVID-19 the activity will address.
  2. Assess the causal or compounding connection.
  3. Assess for disproportionate impact on distressed sectors or populations.
  4. Determine how to prove the expense produces the expected outcome.

It is important to keep in mind that ARPA includes other resources for individuals and businesses that overlap with the permissible uses for state and local ARPA resources.

In addition, the permitted uses for the state, counties, and towns are similar to those permitted for cities. Therefore, city officials should consider coordinating their uses with their counties and the state to maximize the benefits of these federal resources.

See the League’s ARPA FAQs for more details about using the funds

Allocations to Minnesota

The state of Minnesota will be receiving over $2.8 billion for Minnesota’s allocation from the State and Local Fiscal Recovery Fund. In addition, cities classified as “Metropolitan Cities” or “entitlement cities” will receive a total of over $644 million.

All other cities and townships in Minnesota under 50,000 in population, with the exception of Mankato and Moorhead, are considered non-entitlement units of local government and will receive a per capita share of $376.9 million through Minnesota Management and Budget (MMB).

Mankato and Moorhead are not designated as non-entitlement units of local government because they receive direct Community Development Block Grant allocations as a part of Metropolitan Statistical Areas and are thus considered Metropolitan Cities under ARPA.

Portal for cities above 50,000 population

Funds to Minnesota cities will be allocated in two buckets, with half of the full allocation distributed beginning in May for some cities and the second half allocation distributed 12 months after receipt of the first half.

The portal for local governments that will receive their money directly from the Treasury is live. This portal is for cities classified as Metropolitan Cities under ARPA. In Minnesota, that includes cities with populations over 50,000, as well as Mankato and Moorhead.

Access the portal to request local government funds

Cities under 50,000 population to receive funds from state

Local governments designated as non-entitlement units are eligible to receive Coronavirus State and Local Fiscal Recovery Funds, as provided in ARPA. However, they will receive this funding via the state through MMB.

It is expected that MMB may request an allowable extension to distribute the first half of funds to cities below 50,000 in population, which means cities should expect funds sometime in July or August at the earliest, depending on MMB extension requests. The U.S. Treasury Department is expected to release guidance for non-entitlement units of local government in the coming days, including final allocations.

Read about Treasury guidance released on May 24

All cities receiving funds either directly from Treasury or from MMB must obtain a Data Universal Numbering System (DUNS) number.

Learn more about obtaining a DUNS number

LMC webinar

For more information on the allocation process, guidance framework, and eligible expenditures, cities are encouraged to tune into the League webinar, “American Rescue Plan Act Funding Update.”

Access the recorded webinar

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